E-commerce · 5 min read

DNVB 101: is this the business model for you?

03 March 2019

A digitally native vertical brand (DNVB) is born online, selling and shipping its own product. This means it isn’t just e-commerce: it's v-commerce, self-managing the end-to-end distribution. If you’ve got a new business idea and want to take complete control by cutting out the middleman, this might be the model for you.

The term was first coined by Andy Dunn, founder of clothing brand Bonobos, who emphasized the importance of using customer-captured data to improve your business. This then drives brand intimacy as a differentiating factor while also boosting consumer loyalty – especially valuable for subscription-based services which rely upon repeat orders, such as letterbox flower delivery service Bloom and Wild.

However, DNVBs also include businesses that offer single purchases, though the product is typically a specialist one. This provides the DNVB with a focus – doing one thing and doing it better than anyone else. For example, S’well just sells sustainable water bottles, and Stance is purely offering socks and underwear. This enables the brand to become the number one choice in their category, with such simplicity also seeming to guarantee quality to the consumer.

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While the growth of DNVBs may be slower initially, this focus has allowed them to develop niche, dedicated audiences that are now chipping away at bigger brands. The popularity of Dollar Shave Club even caused Gillette’s share of the men’s razor market to fall from 70% in 2010 to 54% in 2016. If you feel ready to take on the market leaders and drive your chosen industry in a new direction, it may be time to enter the v-commerce space. Here’s what you need to know to succeed.

The right product

From the outset, you need to be clear what problem your product is solving for the consumer. Why should they buy yours – which is potentially more expensive – over a mass-produced competitor’s? Many markets are already saturated, so if you’re entering one of those you will need a key differentiating factor.

You also need to target products with a relatively high purchase frequency. This helps you avoid being a one-time product that will quickly fade from view and public interest. The emphasis from there can be on customer retention, which is typically cheaper, as opposed to acquisition.

Personalization

Something many DNVBs capitalize on is personalization. Whether that’s in the service offered or the product itself, the experience of buying becomes truly unique to each customer and their specific needs. Atoms offer their shoes in quarter sizes, allowing the consumer to try on multiple pairs at home and even keep a non-matching set. Andie Swim also lets consumers build their own box of swimwear for a US$10 fee, choosing from an array of sizes and color options per style to try before they buy. The supply chain for DNVBs then becomes completely different to that of a global company such as Amazon, but when done well, this will allow your business to stand out against the lower price points of generic products.

Supply chain control

As a vertically integrated company, a DNVB controls their whole supply chain from manufacturing to the customer’s home, simultaneously cutting out unnecessary middlemen. This makes them all direct-to-consumer businesses, meaning they can track their inventory and feedback constantly to make changes. This high volume of data requires a tech background to manage it effectively, and every company should build a strong, digitally-minded team to get them started. However, if you lack this specific tech-based knowledge, you shouldn’t let it stop you. It may instead be best to use existing software to get your business off the ground. Be sure to select a platform that supports all your ideas for the future, integrates with third-party apps, and is capably equipped for the level of personalization customers should come to expect from your site. However you also need to carefully consider its size – if you go too big too soon, you’ll be underutilizing your resources and paying for it.

Founded in 2002, Jeni’s Splendid Ice Creams partnered with the BigCommerce platform to allow for greater customer choice, meaning you can buy a one-time tub, corporate gift, or Pint Club subscription membership. They now sell out of 35 US stores in addition to online. Many DNVBs also make use of online point-of-sale systems such as Shopify or Magento, helping to seamlessly connect them with a global audience – no matter the currency.

Using the web

For DNVBs, the web acts as an enablement layer rather than the company’s core asset. However it is essential that you make the most of it, as it also serves as the primary means for communicating with customers – typically millennials and digital natives. This means carefully curating your social media channels rather than spending on traditional advertising, with 71% of millennials more likely to buy from a brand they ‘like’ on Facebook or follow on Twitter.

Cosmetics brand Glossier was built almost entirely through Instagram, and founder Emily Weiss credits 90% of their revenue to fans on the photo-sharing platform who spread product awareness through postings. User generated online content is now said to double conversion rates, acting as social proof of an authentic, positive experience with a business. Boosting the brand organically, they also allow customer trust to grow. Due to the potential of consumer content for developing an audience, you may want to design your packaging to be shared on social media, using the visual appearance to sell while also encouraging customers to post unboxing videos.

Extending offline

While DNVBs are born online and take advantage of this platform, increasing numbers are now extending out into brick-and-mortar stores. Kylie Jenner’s cosmetics brand, again launched exclusively on social media, hosts various pop-up shops to coincide with new launches. Translating the online customer experience into a tangible one, they also allow the DNVB to avoid long-term real estate contracts and are definitely worth considering. However some businesses have started to set up permanent locations too, with Alo Yoga opening a flagship store in Beverly Hills. Complete with a yoga studio, lounge area and kombucha on tap, the space acts as a physical extension of the online brand and helps to boost customer loyalty locally.

Going international

While DNVBs have existed in the US for over a decade, and are now responsible for 2% of all online sales, the trend is starting to catch on in Europe. Barcelona-based The Colvin Co is a cut-to-order flower delivery business, but the industry was already undergoing gradual digitalization when they entered it. They primarily worked to clean up the supply side of the sector, enabling them to become a market leader and prove how the business works better online.

However, European businesses must also deal with various internationalization issues if they hope to access wider markets. These include language barriers, cultural differences and cross-border logistics. They also face competition from US companies who have already been in business for several years, establishing themselves as global digital brands and market leaders. This just heightens the need for outstanding customer service, as well as making sure your new product or service is different enough to stand out in what will quickly become a crowded marketplace.

Essentially, you need a strong product, logo and site to build your brand in the DNVB category, as well as a thorough understanding of your logistics plan. Once these are sorted, you're ready to go global – and DHL Express are here to help you get there, shipping to over 220 countries and territories around the world.